The Indian tech and appliances company Micromax is pivoting to smartphones because of politics, geopolitical situation especially between China and U.S. It is a great opportunity for India. The trade war between China and the U.S. has pushed foreign tech companies to relocate part of their production outside of china. India wants to be their next best option. It has a large and cheap workforce plus the government has been offering generous subsidies. While also promising a more open regulatory regime.

Current Situation of India

Before the trade war India ranked third behind Vietnam and China when it came to the global production of mobile phones but with increasing tensions India is now in second place and starting to chip away at China’s market share. If china loses India gains, there’s no other country that has the infrastructure that India have and the manpower that’s the biggest asset. India’s plan to build a competitive smartphone supply chain to China’s is a technical and logistical feat putting to the test whether India can become the world’s next smartphone superpower.

Indian Company Micromax

India isn’t starting from scratch, Indian companies have been making home appliances since 2000. Assembling or manufacturing a display of a mobile phone and TV shares similar technology and experience. In the early years the company was actually in the smartphone business designing and putting them together in the country with roughly 90 of the components coming from China. But micromax’s phone business collapsed once cheaper Chinese products flooded India. Now the company is dusting off their design skills and ramping up its manufacturing capabilities to get back in the game. A big technical challenge was the motherboard which holds all the smartphones key components. Micromax has had to convince other Indian companies to help produce all the parts.

Impact of India

In just six months micromax proved that it could design and put together its own smartphone. It’s now rolling out what it calls Made In India phones. This speedy buildup in India’s smartphone production capacity has caught the attention of tech giants. Samsung closed all its manufacturing facilities in China by 2019 and opened one of its largest factories in India. Even apple’s supplier Foxconn is now producing iphones in the country. The government is also adding an incentive to push tech companies to grow their business in the country.

So it’s offering to pay them up to six percent of the value of the additional mobile phones they sell each year. Micromax claims that 60 of the value of its phone components are currently sourced from India. And with the government’s help the company expects to get to one hundred percent in three years.

Challenges for Indian Companies

It’s not possible for a company like micromax to source a majority of the components locally right now. Because India’s tech industry as a whole still has a long way to go. The value added by the components which are sourced locally is at 12%. While the country is able to produce simple components like battery, chargers or the exterior of phones. It hasn’t yet tackled the challenge of building a domestic and robust supply chain for more sophisticated technology. Like led screens or memory chips and a majority of these components are still coming from China. Even the raw material that goes into the batteries in some of the factories. China controls the lithium supplies globally. To tackle this India has signed agreements with Australia and Bolivia to tap their large lithium reserves.

But until India can fully peel away from Chinese suppliers its smartphone ambitions are under threat. For example a border dispute in the himalayas between China and India during the summer sparked boycotts of Chinese products. Indian customs officials started to manually check tech components imported from China. That ended up stopping Micromax’s production for months. And this shortage of parts came on top of the impact of the coronavirus pandemic. COVID-19 has had a lot of impacts in the whole supply chain. The procurement of components became very difficult. So in order for India to achieve its goal of becoming the world’s smartphone leader it’s going to have to deal with problems at home first.